New bill scraps equalisation, bridging funds
. Merges NNPC, PPPRA, DPR functions
President Goodluck Jonathan received a
copy of the draft bill last month. It is expected that the PIB will be
forwarded to the National Assembly for debate in the next few days for
possible passage into law.
The bill is entitled “An Act to Provide
for the Establishment of the Legal and Regulatory Framework,
Institutions, Regulatory Authorities, for the Nigerian Petroleum
Industry; Establish Guidelines for the Operation of the Upstream and
Downstream Sectors.” When passed, it will be the bible of the Nigerian
oil and gas industry.
The proposed bill has excluded the
Petroleum Equalization Management Fund. Instead there is the Petroleum
Host Communities Fund, which will now provide 10 per cent stake in the
profits of oil and gas companies to host communities.
The PEF, which is currently a parastatal under the Ministry of Petroleum
Resources, has two main objectives: to apply the laws of the Federal
Republic of Nigeria as they affect the uniform pricing system, in
ensuring that each marketing company complies with the laws regarding
the management of the transportation equalisation process, and to
equalise the transportation differentials in product marketing in the
country.
The fund has been an avenue to equalise
the differential gap that marketers incur as a result of the
transportation of petroleum products from the coastal part of the
country to the hinterlands.
Industry sources told Sunday Trust that
the absence of the equalisation fund in the bill will create serious
differences between the prices paid in the south and what will be paid
in the north, in terms of prices petrol, diesel and kerosene.
In the initial PIB, submitted in 2008 by
the late President Umar Musa Yarádua to the National Assembly, there
was a provision for the Petroleum Equalisation Fund. However, the
Inter-Agency Team set up to draft a memorandum on the bill recommended
the scrapping of the fund.
The Inter-Agency team called for a total
deregulation of the downstream sector in order to create a strong
competition, resulting in the lowest possible petroleum product prices
for consumers and to create an attractive environment for investment in
new refining capacity and distribution systems.
Currently, about 90 percent of the fuel
use in the north is accessed by road transportation, using
diesel-powered tankers by marketers. The transportation cost of a 44,000
liters tanker from Lagos or Port Harcourt to either Maiduguri, Kano or
Sokoto is in the range between is between N380,000 to N500,000,
depending on the destination.
As a consequence, the PEF reimburses the
marketers the fees that cover the cost of transporting petroleum
products from depots to filling stations.
“If really there is no provision for the
bridging and equalisation fund in the new bill, then we should get
ready to pay more prices for petroleum products in this part of the
country,” said Danladi Pasali, a national official of independent
marketers.
“We pay for transportation a sum between
N380,000 to N500,000, depending on where your filling station is in the
north. We move these products from Lagos or Port Harcourt. We also pay
between N100,000 to N150,000, for instance, from Suleja depot to some
parts of Kogi or Nasarawa States, if we get fuel at the depots.”
“We can’t pay this amount, apart from
the prices of the fuel and not charge the cost into the petroleum
prices. We sell. It is not possible, definitely we have to recover our
cost,” Pasali added.
But some critics said the equalisation
fund creates opportunities for rent-seeking, which is a source of
corruption. billion for naira is missing in the funds, as many marketers
are suspected to have been presenting fake claims to the agency for
reimbursements.
The drafted bill made provision for Open
Access System, where marketers will pay tariff for accessing petroleum
infrastructure, such as jetties, depots and pipelines.
The bill said in Section 198 that “Open
Access: Licensed petroleum marketing companies shall have equal access
to all jetties facilities and storage depots owned by the refining
companies, which are designated as regulated open access facilities by
the Inspectorate.”
The existing capacity in the said
jetties and storage depots shall be shared amongst licensed oil
marketing and refining companies in proportion to their needs.”
Pasali said “the fear is that if
government allows us to use the pipelines to transport our products to
the north, who will guarantee us the safety of the pipelines, because,
we cannot endure the excessive pipelines vandalism, as marketers.”
The new bill also merges the functions
of the Department of Petroleum Resources with those of the Petroleum
Pricing Regulatory Agency (PPPRA) to form the Nigeria Petroleum
Inspectorate (NPI). The NPI will be the only regulator in the industry
with former bodies as departments under it.
The draft bill does not contain the
Nigerian Petroleum Research Centre. At present, this agency has the
following functions: to (a) carry out research in all areas pertaining
to the petroleum industry, but primarily in the areas of exploration and
production and process technology, with the primary focus on the need
to develop: i) new technologies; and ii) design capabilities suitable
for the needs of Nigeria; (b) carry out research and advise the Minister
and the Directorate on matters relating to exploration and production
outside Nigeria; (c) advise the Minister, the Directorate and the
Inspectorate, as the case may be, on i) the technical evaluation of any
acreages whatsoever; ii) the value of any licences or leases,
particularly during the bidding round process among others.
